Obama proposes lower corporate tax rates
President Obama announced a plan that would cut the top corporate tax rate to 28 percent from 35 percent but close many loopholes that let companies pay far less today. Here, he speaks about the payroll tax cut and unemployment insurance extensions passed by Congress alongside Vice President Joe Biden at the White House on Feb. 21, 2012.
Kai Ryssdal: Item one as we get going today: This is a presidential election year. Item two: Tax reform is a politically difficult thing. Item three: Politically difficult things don't usually get done in presidential election years.
Which leads to conclusion four: The president's proposed changes to the corporate tax structure in this country might better be thought of as the first steps of a negotiation, not as something that will eventually become law as is.
The logic behind it, though, goes something like this: How does this country compete with Europe? With Asia? With anybody, actually -- because it seems cheaper to do business everywhere but here.
The president wants to lower taxes for American companies, especially manufacturers. Our New York bureau chief Heidi Moore walks us through it.
Heidi Moore: Today’s official statements on corporate tax reform sounded to me like the teacher from "Peanuts" putting Peppermint Patty to sleep.
"Peanuts" clip: Wah wah wah wah [snoring sounds] wah wah.
To jolt myself awake, I pretended I’m the CEO of a company, Heidi’s Widgets, and asked some experts whether this new plan would save me money.
Howard Gleckman, at the Tax Policy Center, helped me out.
Howard Gleckman: Let’s say you’re a very successful corporation so you pay the top tax rate of 35 percent, we’re going to cut it to 28 percent.
Score! And since I’m a manufacturer, my new tax rate could be as low as 25 percent.
Gleckman: But we’re going to take away a lot of your tax breaks.
Bummer. And he told me that my taxes will go up on the money I make overseas -- but the government won’t say how much. And here I was hoping they would let me bring that money back to the states so I could hire more people.
Hope Krebs: Didn’t work the last time. I’m dubious.
That’s Hope Krebs. She advises companies for the law firm Duane Morris. I think she’s onto me. In 2004, when Heidi’s Widgets got a tax break for those overseas profits, I didn’t hire anybody. Manufacturers like me always want more.
Moore: Don’t we have tax breaks in favor of manufacturing?
Krebs: Yeah! We’ve got lots of them. Has it made a difference? No.
So I’m paying 25 percent and I’m losing a bunch of tax breaks. How does Heidi’s Widgets stack up next to GE? Howard Gleckman told me not to expect a level playing field -- even at home.
Gleckman: Heidi, you’re never going to compete with General Electric. They have a staff of hundreds of lawyers who make sure they pay taxes in the single digits.
It’s so unfair. But that seems to be something that the tax code can never fix.
In New York, I’m Heidi Moore for Marketplace.